Your equity position or percent equity reflects the relationship between assets and financial obligations, including the respective investment levels of both owners and creditors.
How to Calculate
To calculate your equity position, you will need your business balance sheet. Be reasonable and consistent if you use fair market value to value assets. Exclude personal property (furniture, auto, and family personal assets) as it may distort your equity ratio. On the liability side, include all business debt, including accounts payable. If you are having difficulty with this calculation, consider contacting a resource person such as an accountant or lender. In cases where accountants prepare your statements, cost-based statements may be used which will change the interpretation of financial data.
To calculate your equity position, divide total equity by total assets, which measures the owner’s investment level in the business.